Kolderie on "innovation" and the public sector

Ted Kolderie reflects on the true meaning of innovation -- and resistance to it -- in a major op-ed published in today's print edition of the Minneapolis StarTribune. Full text below:

Innovation seems to be on everyone's mind these days. It's on Gov. Mark Dayton's. His top staffers are going around with a presentation that talks about "Minnesota: A State of Innovation."

Minnesota is challenged, the presentation says. We need to get the state "working again." Innovation is important for both the private economy and the public sector.

You do wonder, when everybody is for something, whether we all agree on -- or even understand -- what it means. There is some danger that "innovation" is becoming just a new word for "change" -- a new word for "new."

So, then: What kind of new? Something new anywhere? Something new here? Are we talking about invention? Or about replication?

Let's start with "invention," the something-new-anywhere kind of innovation.

Growing up, we read about Robert Fulton and the steamboat, Samuel Morse and the telegraph, Thomas Edison and the light bulb, the Wright brothers and the airplane. They were the inventors.

In "How Invention Begins," though, John Lienhard writes about an "arc of invention." Lienhard was a professor of mechanical engineering and history, and for years an essayist on public radio. The "arc" means that invention usually builds on the work of others who laid the foundation for what the acknowledged inventor was to do.

The light bulb was ready to be invented by someone, if not by Edison, and "the airplane was about to be invented, one way or another."

Later, follow-on improvements complete the arc. After 1903 the airplane improved rapidly, so that by the late 1920s someone was going to fly the Atlantic solo. It happened to be Lindbergh.

Clayton Christensen at the Harvard Business School has made famous the distinction between "sustaining innovation" -- this continuing improvement on an existing model -- and "disruptive innovation" -- the radically different product or business model.

His best example of disruption is the transistor radio, a "crummy radio" by the quality standards of the time. It had neither good wood cabinetry nor good vacuum-tube sound. But it had something the old Zenith in the living room did not have. It was portable. Transistor radio blew vacuum-tube radio out of the market, Christensen wrote.

A disruptive innovation is one to which existing producers are unable to respond. By serving a market they do not serve, with an innovation that their "way of doing things" and their cost-structure cannot imitate -- and that their best customers do not want -- it eats them up from below.

After he published "The Innovator's Dilemma," Christensen's school said: "We educate corporate managers to lead change. You're telling them they're bound to fail against a disruptive innovation. Can't you find some way to tell them how they can win?"

Christensen looked for cases where a business did respond successfully to disruptive change. In a Harvard Business Review article early in 2000 he pointed to Dayton-Hudson Corp. Of perhaps 360 full-line department store companies in America about 1961, he said, only Dayton-Hudson got successfully into discount retailing.

How? By setting up its discount operation in a totally separate organization: Target. That let it run two different -- and competing -- businesses at the same time.

"We knew when we took over the business in the 1950s," Bruce Dayton recalled at a small luncheon not long ago, "that the department store was a dying breed of cat." The Dayton brothers did not invent discounting. As Douglas Dayton tells the story, they heard about it at a convention. They opened the first Target stores in the Twin Cities area about 1962. Soon, Ken Dayton, heading the department stores, was complaining about how Target was cutting into his business. But when the brothers sat as the board of the parent corporation, how could they complain?

We know how that story came out. But there are not many such cases of a single firm successfully replicating a disruptive innovation.

Some of the truly disruptive innovations are in products, some in services. Some emerge from laboratories. Some are just thought up.

Motorola put Marty Cooper in charge of its car phone division about 1970. Company executives wanted to expand that in-car market. Cooper "became a zealot for products being portable," the Economist wrote in his obituary in June 2009. (Obituaries often contain wonderful stories about innovation.) By the mid-1970s, he had got the weight of the DynaTAC phone down to a pound, and its price down to $4,000. "We'll get it down to the size of your palm," he promised.

Today more than half the world's population has a mobile phone -- in the palm of the hand.

Henry Brown died in 2008. In 1969, the New York Times wrote, he was "a struggling financial consultant." At the time, a Depression-era law limited the interest rate that banks could pay to small savers. Big savers could buy big corporate or government bonds that paid higher rates. One afternoon Brown asked himself: What if we created a fund and bought some high-rate bonds and sold the fund off in little pieces, giving small savers access to higher returns? His fund was $250,000 in debt before a newspaper story in 1973 brought the idea to public attention.

By 2008, total money-market mutual fund assets were $3.5 trillion.

In 1937, Malcolm McLean, a small-time trucker, was waiting to have a trailer full of cotton bales loaded onto a ship. "I was watching stevedores take each crate off a truck and slip it into a sling which would lower it into the hold of a ship. It occurred to me that it would be easier to lift my trailer up and, without any of its contents being touched, put it on the ship," the Economist quoted McLean as saying in June 2001. His Sea-Land was the biggest container carrier in the world when he sold his interest in 1969 (for $160 million).

By 1996, 90 percent of world trade was moving in containers.

A new use of a known thing is another kind of innovation -- the most important kind, some believe. As Lienhard notes, the steam engine worked for years pumping water out of coal mines before someone thought to use it to pull a train or to power a boat or to turn an electric generator. The professional partnership, long known in white-collar occupations, is coming into use now as an organizational model for teachers.

Sometimes innovation is spurned. Chester Carlson -- from Grove City, Minn. -- was turned down by more than 20 companies before his idea for a different method of copying was picked up by an obscure firm in Rochester, N.Y. It later became known as Xerox.

Sometimes big companies cannot see potential. Western Union turned down the telephone. In 1964, AT&T turned down the Internet. In "Nerds 2.0.1," Stephen Segaller quotes Larry Roberts, an official with the Defense Advanced Research Products Agency: "We went to AT&T and made an official offer to let them take it over. We'd give it to them, basically. They could expand it commercially. And they had a huge meeting and went through Bell Labs and made a serious decision that it was incompatible with their network. They couldn't possibly consider it. It was not something they could use. Or sell."

People laughed when Robert Goddard in 1919 proposed a multistage rocket to the moon. The New York Times said he lacked "the knowledge ladled out daily in high schools."

Forty-nine years later, with Apollo 11 circling the moon, the Times ran a correction.

That was not the Times' only goof. "Television will never be a serious competitor for radio," the paper wrote in 1939, the year TV appeared at the World's Fair, "because people must sit and keep their eyes glued on a screen. The average American family hasn't time for it."

The common thread running through the story of innovation is someone's ability to see things differently -- regardless of their situation in life, their background or their training. Innovation, invention, is essentially an act of dissent and rebellion, Lienhard writes; it is an attempt to create a new future.

The most visionary inventor -- perhaps also, entrepreneur -- is the one who reads most clearly the forces working in the present. In his book, Lienhard foresees digital electronics having a revolutionary impact on education, comparable to that produced by the fast presses of the early 19th century. Ken Auletta, author of "Googled," agrees that "school" is another "old media" -- a candidate for disruption.

Because innovation is so challenging, it is often resisted. This is a particular problem for innovation in government, where challenge is often not welcomed.

"Don't use the term 'change,' " a leading school superintendent said in a meeting of Gov. Rudy Perpich's "discussion group" in late 1985. "For heavens sake, why not?" someone finally asked. "To talk about change," he said, "implies that what went before was not OK."

In the public sector, where people feel a need for certainty, dissent can be seen as disloyalty. Government, of course, is subject to political pressure from established producers threatened by innovation. And, despite the work of the late Leonid Hurwicz of the University of Minnesota -- who shared the Nobel Prize in economics in 2007 for his work on incentives -- government's impulse is usually to do things directly. It is hard for political people to think in terms of causing change, by creating reasons and opportunities -- incentives -- for organizations to innovate.

David Osborne sold 250,000 copies of "Reinventing Government." But he told me he discovered, when trying to implement it in Washington, that "public administrators don't want to reinvent government!"

Everywhere, fear of failure and aversion to risk deter innovation. The best rule for those in public life, where majoritarian politics rule, is to take to heart the caution of one investor (in xerography, as it happens): "If you have something unique, don't put it to a vote."

Basically, innovation is letting people try things. It will take some careful thinking, Gov. Dayton -- important as innovation is -- to arrange for that to happen.

* * *

Ted Kolderie is a former executive director of the Citizens League, senior fellow at the Humphrey School of Public Affairs and Star Tribune journalist. He has been working on public-service redesign for decades, currently with the Center for Policy Studies.

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Alysia Krafel (not verified) wrote, 12/6/12 @ 12:10pm:

My husband and I started the first charter school north of Sacramento in 1996. It took three years of hard work to get the charter because everyone who we needed to sign on legally to allow it to happen were afraid of us. The ones who were not afraid, told us it would never work, teachers want security of a union they said. Charter schools were a hot topic at the time. The California Teachers Association took our draft charter to a convention and had classes on how it was wrong, and how to fight us. They did fight us using every means they had at their command, with job actions, veiled threats to teachers who signed our charter petition etc.. One of those tools was their ability to ridicule us in the public media. So when we finally got the charter, by stealth, we made the headlines in our local papers. Starting the school, was very risky as we were grossly under capitalized, and highly visible in the community with a model that had never been tried. If we failed, or worse made any errors in fiscal management, we would have been pilloried in the public forum and would have created a dam that would prevent others from starting charter schools for a long time. This was not an endeavor for the faint of heart. It was a hard two years and we did not fail. In fact, we were so successful the local school districts had to change their programs to compete with us. There are now eleven charter schools in our town. The competition for students is intense and charter schools are out competing the regular schools in attracting students. The union is taking a hard look at teacher empowered schools. I hope they act like Target.

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